LLC company formation in Dubai and the UAE (2018 guide)

Setting up a company anywhere in the world can be daunting, and the UAE is no different. While the business landscape here in the Emirates is certainly accommodating, the various types of companies that may be set up here can seem a little confusing, particularly for first time entrepreneurs.

I have talked in the past about the various benefits of free zone versus mainland setup. What I want to look at today is one specific mainland option – the LLC.

So let’s get right into it.

Understanding LLC company formation in Dubai and the UAE

The LLC is the most common type of business in the UAE, an independent legal entity owned by multiple shareholders, established on the UAE mainland. It has low startup costs and full access to the wider UAE marketplace.

If that sounds like you, here’s everything you need to know about LLC company formation in Dubai and the UAE.

1. Quick and easy setup: One of the major reasons why LLCs remain the most popular type of business setup out here is the incredible ease of LLC company formation in Dubai and the UAE. In many cases, there are fewer hoops to jump through when establishing an LLC than when setting up in a free zone. In fact, new initiatives have made the setup process so easy that, providing you meet the entry criteria, you could be registered with the Dubai Department of Economic Development (DED) within just 90 minutes, without having to commit to a lease agreement.

2. Affordable company formation: I’ve spoken to many entrepreneurs over the years who are under the impression that LLC company formation in Dubai and the UAE is an expensive way of doing business. On the contrary, the cost of forming an LLC is comparable to setting up in a free zone. The starting price for licence applications is around AED 17,000 and, depending on the exact nature of your business, costs are unlikely to rise above 100,000.

3. Opportunity to apply for multiple visas: The beauty of setting up on the UAE mainland is that it allows entrepreneurs to apply for unlimited visas. There is a slight caveat, however: the more visas you apply for, the more office space you must acquire. The general rule of thumb is 100 sq. ft. of office or warehouse space per visa. Having said that, in some cases, this may be negotiable with the DED. For example, a domestic cleaning company may have 500+ employees working remotely – and therefore will not be required to take 50,000 sq. ft. of office space.

The beauty of setting up on the UAE mainland is that it allows entrepreneurs to apply for unlimited visas.

4. Set up anywhere: In Dubai, LLCs are required to take on office space. The upside of this is that, unlike other methods of company formation, as an LLC you are able to take on office or warehouse space anywhere throughout the UAE.

5. Option to trade with the larger UAE market: Perhaps the number one reason why LLCs are the most popular company type in the UAE is that they allow businesses to trade with the entire UAE market directly, something that is not possible from a free zone. What’s more, mainland LLCs are also permitted to bid for lucrative government contracts. That is a big opportunity here in the UAE, where government contracts are in the billions of dollars each year.

6. Carry out a wide range of business activities: Unlike some free zones, LLCs have no restrictions on the type of business activities they can carry out. Companies are permitted to trade in any of the thousands of activities listed by the DED – across industries as diverse as agriculture, manufacturing, construction, hospitality, and finance.

7. No requirement for paid upfront share capital: LLC company formation in Dubai and the UAE is incredibly affordable. As well as minimal application costs, there is also no requirement to put forward paid upfront share capital.

8. Open branch offices: Establishing as an LLC is one of the most effective ways to gain and grow a business in the UAE. As well as being able to set up and trade throughout the local UAE market, you’re also able to open further branch offices to establish a greater nationwide presence.

9. It’s easy to sponsor dependents: When establishing an LLC, you are eligible for an investor visa, under which you are afforded investor status in the UAE. Not only does this allow you to stay as a resident in the UAE for up to three years, but you can also sponsor family members and domestic staff for their visas as well. Whether you require a visa for a spouse, child, maid or driver, the process is straightforward: entry permit, status adjustment, a medical fitness test, then Emirates ID registration and visa stamping. As this is such an important process, it’s a good idea to get advice from an expert in setting up UAE free zone businesses to ensure that before starting an application, both you and those you are hoping to sponsor meet the entry criteria.

It’s a good idea to get advice from an expert in setting up UAE free zone businesses to ensure that before starting an application, both you and those you are hoping to sponsor meet the entry criteria.

10. Set up with multiple shareholders: Every LLC must be established with at least two shareholders and while there is not an official upper limit, the generally accepted shareholder cap is 50 – these can be either individuals or corporate entities.

Setting up your LLC company

So, now you’re armed with everything you need to know about LLCs, the next question is – how do you set up on the UAE mainland?

The first couple of steps are relatively straightforward: choose a business activity and reserve your company name. A list of permitted business activities is available from the DED, simply choose the one that best suits your business – a company formation specialist can help you decide on the most appropriate.

When it comes to choosing a name, there are a few things to keep in mind: offensive language is forbidden, company names cannot contain religious references, or indeed references to any known organisations (anything from ‘FBI’ to ‘Mafia’). Both first name and last name are required if you are using your personal name as your company name. When it comes to your company name in different languages, all names must be written as they are sounded out, rather than translated.

A local sponsor is required by any foreign investor wishing to set up on the UAE mainland. Local sponsors own 51% of the business with the other 49% owned by the investor (or investors). However, profits are not split down these lines and full control almost always remains with the foreign investors. Sponsors must be professionals, business owners or government employees and citizens of the UAE. As this process can be complex, it is advisable to engage the services of a company formation specialist at this stage.

A local sponsor is required by any foreign investor wishing to set up on the UAE mainland.

Now you are ready to apply for your licence. To do this, you need to provide the DED with certain documents that will include your licence application, memorandum of association detailing sponsor arrangements and ownership percentage among all partners, a certificate of incorporation (if one or more shareholders are corporates), the board resolution approving the LLC, and copies of shareholder passports and visas. You can also apply for your immigration card and any additional visas that may be required at the same time.

And that’s it. The process is usually complete in a matter of weeks and once you receive your license you will be ready to open your corporate bank account and set up your LLC anywhere in the UAE mainland.

About the author: John Hanafin, CEO at Virtuzone Business

With 25 years of experience in the company formation industry, John Hanafin is well known in the UAE and beyond as a specialist in corporate services, and shares a passion for helping others establish and grow their own businesses across the UAE and wider region. John joined Virtugroup in 2017 after spending 12 years with The Sovereign Group as their Global Sales Director, and two years as CEO of Arton Capital.